DECEMBER 1994 Edition
FREE TRADE
The U.S. Commerce Secretary has again stated that the
NAFTA is proving to be an economic boon and a creator of jobs. Figures for the
first nine months of the pact show that exports to Canada and Mexico account
for almost half of U.S. export growth. While total U.S. exports were up seven
per cent, exports to Canada and Mexico were up 14 per cent. U.S. exports to
Mexico are at record levels and rose 22 per cent for the nine month period.
Imports were up 23 per cent. Trade with Canada, the largest trading partner
with the United States, also grew with exports to Canada up 11 per cent and
imports from Canada up 13 per cent.
WORLD TOURISM
According to the Asia Pacific Foundation, Asians will
account for 70 per cent of global travel by the year 2010. Two decades ago,
Asians accounted for only 10 per cent of global travel. Competition is fierce
within the region and around the world and Canada will have to fight to retain
its share. Australia is implementing an aggressive $60 million marketing
program and has set annual targets of 11 per cent growth until the turn of the
century. Canada has already lost market share to Australia, and Japan has now
become Australia's chief source of arrivals. Experts say that in order to
attract a larger share of the Asia Pacific market, Canada must be aware of the
changes taking place within this market and adapt our products and services to
meet the tastes and interest of Asian clients. By the turn of the century, only
one in five travellers will be on business.
GINSENG
Starting almost from scratch nearly twelve years ago,
British Columbia, with its large Asian population and close ties with the
Pacific Rim, started farming ginseng and now produces about $30 million worth
of the root a year. It is expected that the harvest will quadruple by 2000.
Altogether, around a sixth of the world's $954 million worth of ginseng is
produced in North America. The crop earns farmers up to $165,000 an acre, far
more than the familiar crops. China alone uses roughly 3 million pound of North
American ginseng, about 60 per cent of the total crop. Two companies, both
based in Vancouver, are dominating the industry.
HOW TO FAIL AT EXPORTING
According to Ottawa's trade people, these are the ten
commonest mistakes make by new exporters:
* Failure to obtain
export counselling and develop a master international marketing plan.
* Not enough commitment
by top management to overcome initial difficulties.
* Not enough care given
to selecting overseas agents or distributors,
* Chasing orders from
around the world instead of establishing a profitable base.
* Neglecting the overseas
market when the domestic market booms.
* Failure to treat
international distributors on an equal basis with domestic ones.
* Unwillingness to modify
products to meet regulations of other countries.
* Failure to print
services, sales and warranty messages in locally understood languages.
* Failure to consider use
of an export management company, or other intermediary.
* Failure to consider
licensing or joint venture agreements.
MEGA-STORES
Eagle Hardware of Tukwila, Washington, entered Canada a
year ago selling in Alberta and B.C. Now, it is selling its properties for book
value, plus tax losses, to rival Revelstoke Home Centres and retreating back to
the States. The two Edmonton stores are closing at a cost of 300 full- and
part-time jobs. Inventory and fixtures will probably be transferred to new
Eagle stores in the U.S. where the company's 17 outlets compete primarily
against Home Depot Inc. It is claimed that Eagle could not compete against the
likes of Home Depot and that Revelstoke gained an advantage by wrapping itself
in the Canadian flag and appealing to Albertans' patriotism. Experts have
claimed for some time that Vancouver cannot support all the current and promised
home-improvement stores.
VACATIONS
According to the Conference Board, the weak dollar will
keep many more Canadians at home this winter. This is based on a random survey
of 1500 Canadians in September. Less than one-third of Canadians are planning a
vacation trip this winter, down from 44 per cent last year and 54 per cent in
1992. Florida will be the hardest hit but planned visits are down for all
destinations. But almost one-third of those who will travel outside Canada
expect to spend more money on their vacations this winter than last, almost
double the proportion who felt that way
a year ago and the highest proportion in four years. Meanwhile, the 68 per cent
of Canadians who are staying home expect to take short trips.
TRUCKING
As with the related industries of rail and air cargo, the
Canadian trucking industry is booming again and is faced with a problem it has
not had since the mid-1980s, a shortage of labour and equipment. There is a
one-year waiting period for trailers and 18 months for highway tractors.
Ontario needs at least 1,500 truck drivers now, and even more through 1995. In
the first quarter of 1994, the big trucking companies returned to profitability
on revenues of $828.5 million and $888.2 million in the second compared to $777
million in the same period in 1993, the best in five years.
Starting in 1988, the industry suffered tough times due
to deregulation, the introduction of the FTA and a rising Canadian dollar. The
slump was made worse by the invasion of U.S. truckers who were able to undercut
Canadian truckers in the domestic market because of lower fuel costs, taxes and
wages. Now, with the lower Canadian dollar, the industry is making heavy
inroads into the U.S. market. Canadian truckers now carry 80 per cent of Ontario-U.S.
trade, a far cry from the late 1980s when U.S. truckers carried most of the
goods that crossed the border.
JOBS
A survey of 1,500 Canadian employers shows that 16 per
cent intend to hire workers between January and March, while 15 per cent say
staff numbers will decline. A year ago, 9 per cent were hiring and 22 per cent
were cutting. Hiring is expected in mining, durable and non-durable goods
manufacturing, transportation and public utilities, finance, insurance and real
estate, business and health services, and public administration. Reductions are
planned in the construction, wholesale and retail trades and education sectors.
In the U.S., employers plan to add to their work forces
in the first quarter at the fastest rate in five years, with prospects
strongest in the southern and midwestern states. In a survey of more than
15,000 businesses in nine industries, 22 per cent of companies said they plan
to increase hiring while 12 per cent said they expect a decrease.
Among manufacturers of
durable goods such as appliances and automobiles, 32 per cent indicated they
expected to add staff.
TELEPHONES
With dual-career and single family households on the rise
the trend is towards more home shopping--$8.4 billion of it in 1992. Now, New
Brunswick Telephone and Northern Telecom have sunk $40 million into a joint
venture company called CallMall which has introduced an interactive telephone
system in Moncton. It gives consumers access to banking, shopping and
communications services over a display-screen telephone. Consumers will also be
able to view text advertisements on the small screen and, if interested in an
ad, read more information and hear an audio clip. In 1990, Bell Canada spent
tens of millions on a similar service before pulling the plug in 1991 because
of lack of interest.
TECHNOLOGY
A "personal navigation system" for the blind is
now in the experimental stage. The 12 kilogram device interprets signals from a
military network of global positioning satellites and feeds them into a
computerized map. In turn, headphones connected to the map "read out"
the location of objects. An electronic compass on the person's head tells the
computer the exact position of the individual's ears, so that it can then send
messages sounding as though they were coming from an object. When used in
conjunction with a cane or guide dog, the device can steer people through
totally unfamiliar terrain. From satellites it knows a person's position on
Earth to an accuracy of one metre.
U.S. EXPORTERS
Mid-sized companies are looking abroad for opportunities
and, spurred by the NAFTA, they are looking to Canada and Mexico first. Both
are tied at 33 per cent as the first foreign markets that American firms want
to enter. Western Europe is third at 31 per cent with Asian countries at 27 per
cent. This Ernst & Young survey contacted CEO's of 384 companies with
combined sales of $35 billion and 400,000 American employees.
Nearly half of the companies listed either direct
exporting or establishing alliances with foreign distributors as first choices
for foreign business and 27 per cent want to set up an overseas sales office
and 24 per cent want to establish either a joint venture or a licensing
program. In terms of major barriers to foreign trade, poor understanding of
foreign markets ranked as the biggest problem. Other points in the study
include: 71 per cent of companies believe profits will increase in the next
twelve months; 44 per cent of firms are increasing capital spending and 62 per
cent intend to expand their work force.
WATER
The price of water in most countries has more to do with
politics than with the economic cost of providing it, often almost impossible
to calculate. This is because by far the biggest cost is the massive bill for
the infrastructure that delivers the water; yet in many countries this was paid
off years ago. Of the 14 countries surveyed by National Utilities Services, to
July 1994, Germany had by far the highest water charges at $1.69 (U.S.) per
cubic metre. Canada has the cheapest water at $0.35 per cubic metre. (Costs in
the U.S. were about $0.55 a cubic metre). Prices rose fastest last year in South
Africa, by 11 per cent, to help pay for better water supplies to poorer areas.
They fell by 14 per cent in Australia due to changes in regulations.
CATTLE
The worldwide number of cattle rose slightly this year
according to estimates by the U.S. Department of Agriculture and is expected to
reach 1.04 billion early next year. In Canada, cattle are expected to number
12.5 million head in January--beef exports to the U.S. could rise by 10 per
cent in 1995 as packers continue their aggressive marketing of delicious,
low-fat Canadian beef.
CARTOGRAPHY!
* The Ontario government
recently unveiled a new film to a Toronto business audience on the opening of
the province's new investment promotion office. The map of the province, shown
repeatedly in the production, showed large parts of the province as being in
the United States. The film is to be changed.
* There is a map in the
Stanford University's business school entitled "The Two Americas."
Many would expect this map to depict the familiar theme that America is divided
between rich and poor. In fact it is divided into patterns for purchasing
mayonnaise. In the North and West consumers buy Miracle Whip, while the South
and East go with Hellmann's.
* In the briefing book
prepared for journalists, officials, provincial premiers and business
executives prior to Prime Minister Chretien's recent Asia tour, Hong Kong, (one
of the most important stops), was left off the map. Even worse, Taiwan was
shown as a separate country, a major insult to China.
TRIVIA
* According to the Forbes
400, Bill Gates of Microsoft is worth $9.35 billion. Chile has a national
budget of $7.1 billion.
* Concern that racing
pigeons are taking performance-enhancing steroids has led the Dutch Carrier
Pigeon Organization to require droppings from the first 10 finishers for
testing.
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